Sometimes a property is advertised as “subject to interior inspection” or “drive by only”. What does this mean exactly? This means that the seller is selling the property, but only showing it to the offer they select.

While this may be found only occasionally on standard or single family home sales, it is typical to find this request on Income or multi-unit property sales. The explanation is simple: Most multi-family properties (ie, duplexes, triplexes, and fourplexes) are fully rented and therefore, tenant occupied. The seller of the property doesn’t wish to disturb the tenants for every potential buyer who wants to view the units.

For many buyers, especially those who are new to income properties, this can be an unusual concept. The first question I am always asked is, “you mean I need to write an offer before I even see the property?” In this case, yes, that’s what I mean. The usual procedure is to visit and view a property before offering on it, but income properties are different. Understandably, the property’s tenants are not involved in the sale and they would become upset if they had to show their home to everyone who wanted to drop by and look at the property. Basically the seller wants to be sure that the buyer is “real” before they allow a showing. This helps eliminate “looky loos” and unnecessary disturbances to the tenants.

Is it risky then to make an offer without seeing the interior of all of the units?

Not really. The offer is just that – Nothing more that a signed proposal. You would not have to include a deposit with your offer so you’re not handing over any money. The offer should be written to include “subject to interior inspection” in the additional terms section, so your offer is really “conditional”. If your offer is accepted, the seller’s agent will make arrangements to allow you to view all of the units. Based on your inspection, you would have every right to cancel the offer if you did not like what you saw. Further, even if you do proceed with the sale and open escrow, you still have a designated period of time to do all of your inspections, review the books, and other due diligence, including using a professional home inspector. This period is usually up to 17 days.

For multi-units, there are cases where one or more of the units are vacant. Also, one of the units may be occupied by the owner of the complex or a cooperative tenant, and is these cases, seeing at least one of the units may be a possibility. In other cases however, go ahead with the drive by and check out the exterior of the property as well as the neighborhood. If these check out, do go ahead with an offer “subject to inspection”. In the worst case, you will simply have to withdraw it.